International Trade in the Dominican Republic

News Related to International Trade in the Dominican Republic

Business outline for the Dominican Republic

Economic Overview

The Dominican economy, which had shown a strong growth until 2007, was affected by the global economic crisis, which provoked a drop in tourism and in money transfers from expatriates.  The crisis intensified structural problems such as failures in the electric sector and almost created a tax deficit in the Central Bank. After having dropped to 3.5% in 2009, the GDP's growth rebounded in 2010 attaining 5.5%, and it should remain at this level in 2011. 

The government revenues dropped under the effect of the crisis and the Dominican Republic had to negotiate with the IMF a stand-by agreement which essentially consists of implementing a contra-cyclic fiscal policy and a flexible monetary policy.  If the revival is vigorous, the country still has to increase fiscal revenues, to reduce the electricity subventions and to prevent overheating the economy. 

The Dominican Republic is a middle-income country where there is a great level of inequality in the share of revenues.  More than one third of its population lives below the poverty line, the rate of unemployment is high (14%), as well as the level of informal work.

FDI in Figures

The country is among the main recipients of FDI in the Caribbean and Central America. The Dominican Republic had been receiving a growing inflow of FDI until 2008. Due to the slowdown of the global economy, the FDI flow was reduced in 2009, but it still represented USD 2.1 billion and it has started to increase again in 2010. The share of the FDI's stocks in regards to the GDP remains relatively low when compared to other developing countries. 

The difficulties that foreign investors have to face include: corruption, failure to honor contracts, disregard for court rulings and a lack of standard procedures for the customs valuation of imported goods. 

The tourism sector is the largest recipient of foreign investment. The United States is the largest investor, followed by Canada and Spain.

Foreign Trade Overview

The Dominican Republic is a country suitable for trade, it applies a liberal and open policy. The Free Trade Zone Industrial Association (FTZ) is an important pillar of the country's economy, which represented more than two-thirds of total exports in 2009. During the period 2007-2009, foreign trade represented 60% of the GDP.

Custom duties are relatively low. However, in order to protect the local producers, certain agricultural products (such as milk, rice, etc.) and luxury products have higher tariffs ranging from 15% to 60%.  Also, special permits are required for the import of certain specific products such as medicines and agricultural fertilizers. It is expected that the Central America-Dominican Republic Free Trade Agreement (CAFTA-DR) which came into force in March 2007 will lead to substantial growth in the FTZ sector in the next coming years.

Like most of the Caribbean islands, the Dominican Republic has a structural trade deficit, a trend that is expected to continue.

The main trading partners of the country are the United States, the European Union and Venezuela.